Aussie Extends Weekly Gain Versus Yen on Stimulus; Kiwi Advances

Australia’s dollar headed for its first weekly advance in four versus the yen as expectations of continued monetary stimulus from major central banks buoyed demand for the South Pacific nation’s higher-yielding assets.

The Australian and New Zealand currencies rose against their major peers amid prospects for continued quantitative easing under a Federal Reserve led by Janet Yellen, while central bankers in Japan and Europe ease policy. Australia’s benchmark 10-year bond yield rose for a third week before the nation’s Reserve Bank releases minutes of its November meeting. The government plans an inaugural sale of 20-year bonds next month, its longest-tenor nominal debt.

“The central bank outlook will remain supportive in the near term,” said David Forrester, a senior vice president for Group of 10 foreign-exchange strategy at Macquarie Bank Ltd. in Sydney. “With the weaker yen, the Aussie and kiwi tend to outperform.”

The Australian dollar rose 0.3 percent to 93.44 yen as of 5:03 p.m. in Sydney, heading for a 0.5 percent gain since Nov. 8. It rose 0.2 percent to 93.32 U.S. cents, trimming to 0.6 percent its fourth weekly decline.

New Zealand’s dollar rallied 0.3 percent to 82.97 yen, set for a 1.5 percent advance this week. It added 0.2 percent to 82.88 U.S. cents, on track for a 0.4 percent, five-day gain.

The yield on Australian 10-year government debt was little changed at 4.20 percent. It touched 4.3 percent on Nov. 13, the highest since March 2012. Yields have risen seven basis points, or 0.07 percentage point, this week.

Central Banks

“It’s important not to remove support, especially when the recovery is fragile,” Yellen said in response to a question during testimony to the Senate Banking Committee in Washington yesterday. She said the central bank’s key interest rate, at a record zero to 0.25 percent, would remain low even after policy makers start to reduce monetary easing.

European Central Bank President Mario Draghi said policy makers “are ready to consider all available instruments” after unexpectedly cutting interest rates last week to support growth. The Bank of Japan will add to stimulus in the first half of next year, according to almost three-quarters of economists surveyed by Bloomberg News.

“The global backdrop is improving,” Peter Dragicevich, a currency strategist in Sydney at Commonwealth Bank of Australia, said in an interview with Bloomberg Television today. “That’s good for the Aussie dollar.”

RBA Minutes

The Reserve Bank of Australia releases on Nov. 19 minutes of its meeting this month when policy makers kept the benchmark interest rate at a record low 2.5 percent. RBA Governor Glenn Stevens called the exchange rate “uncomfortably high.”

Traders see 11 percent odds that the RBA will reduce borrowing costs at its next meeting in December, according to interest-rate swaps data compiled by Bloomberg.

“The most important thing for the RBA outlook is what the currency does,” said Macquarie’s Forrester. “Let’s say the Aussie stays around 94, 96 U.S. cents, I think that could push the RBA to cut rates more.”

The Aussie will weaken to 90 U.S. cents by mid-2014, according to the median estimate of analysts polled by Bloomberg. The gap between the highest and lowest forecast is the widest among 16 Group-of-10 currency pairs Bloomberg tracks, ranging between a rally to U.S. dollar parity and a slump to 80 U.S. cents.

Australia will next week sell a new line of April 2033 notes in a transaction led by banks, the Australian Office of Financial Management said today in a statement. The issuance will help to fulfill a promise by Treasurer Joe Hockey to extend the yield curve as the government seeks to finance budget deficits.

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